Accounting Standard 31

8/14/2019 Accounting Standard 31

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Accounting Standard (AS) 30Accounting Standard (AS) 30Financial Instruments:Financial Instruments:

Recognition and MeasurementRecognition and Measurement


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Limited Revisions toLimited Revisions to

AS 2,AS 2,AS 11 (revised 2003),AS 11 (revised 2003),AS 21,AS 21,

AS 23,AS 23,AS 26,AS 26,AS 27AS 27AS 28AS 28

AS 29AS 29


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OBJECTIVEOBJECTIVE

Recognising and measuring financialRecognising and measuring financialassets, financial liabilities and someassets, financial liabilities and somecontracts to buy or sell non-financialcontracts to buy or sell non-financialitems.items.Requirements for presentingRequirements for presentinginformation about financialinformation about financialinstrumentsinstruments


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DEFENITIONSDEFENITIONS

DerivativeDerivative(a) its value changes in response to the change(a) its value changes in response to the changein a specified interest rate, financial instrument in a specified interest rate, financial instrument

price, commodity price, foreign exchange rate, price, commodity price, foreign exchange rate,index of prices or rates, credit rating or credit index of prices or rates, credit rating or credit

index, or other variable, provided in the case of aindex, or other variable, provided in the case of anon-financial variable that the variable is not non-financial variable that the variable is not specific to a party to the contract specific to a party to the contract (b) it requires no initial net investment or an(b) it requires no initial net investment or aninitial net investment that is smaller than would initial net investment that is smaller than would be required for other types of contracts that be required for other types of contracts that would be expected to have a similar response towould be expected to have a similar response tochanges in market factorschanges in market factors(c) it is settled at a future date.(c) it is settled at a future date.


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RECOGNITIONRECOGNITION

An entity should recognise a An entity should recognise afinancial asset or a financial financial asset or a financial liability on its balance sheet liability on its balance sheet when, and only when, the entity when, and only when, the entity becomes a party to thebecomes a party to thecontractual provisions of thecontractual provisions of the

instrument.instrument.


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DERECOGNITIONDERECOGNITION

Three conditions.Three conditions.

The part comprises only specifically identified cashThe part comprises only specifically identified cashflows from a financial asset (or a group of similar flows from a financial asset (or a group of similar financial assets).financial assets).

The part comprises only a fully proportionate (proThe part comprises only a fully proportionate (prorata) share of the cash flows from a financial asset rata) share of the cash flows from a financial asset (or a group of similar financial assets)(or a group of similar financial assets)

The part comprises only a fully proportionate (proThe part comprises only a fully proportionate (prorata) share of specifically identified cash flowsrata) share of specifically identified cash flowsfrom a financial asset (or a group of similar from a financial asset (or a group of similar financial assets).financial assets).


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MeasurementMeasurement

When a financial asset or financial liability is recognised When a financial asset or financial liability is recognised initially, an entity should measure it as follows:initially, an entity should measure it as follows:

(a)(a) A financial asset or financial liability at fair value A financial asset or financial liability at fair value throughthrough profit or loss should be measured at fair value on the date of profit or loss should be measured at fair value on the date of

acquisition or issue.acquisition or issue.

(b)(b) Short-term receivables and payablesShort-term receivables and payables with no stated with no stated interest rate should be measured at original invoice amount interest rate should be measured at original invoice amount if the effect of discounting is immaterial.if the effect of discounting is immaterial.

(c) Other financial assets or financial liabilities should be(c) Other financial assets or financial liabilities should bemeasured at fair value plus/ minus transaction costs that aremeasured at fair value plus/ minus transaction costs that aredirectly attributable to the acquisition or issue of thedirectly attributable to the acquisition or issue of thefinancial asset or financial liability financial asset or financial liability


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ACCOUNTING STANDARDACCOUNTING STANDARD

31:31:FINANCIALFINANCIAL

INSTRUMENTSINSTRUMENTS:PRESENTATIONS:PRESENTATIONS


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Financial Assets and FinancialFinancial Assets and FinancialLiabilitiesLiabilities

LIABILITIESLIABILITIES(a) trade accounts(a) trade accountspayablepayable

(b) bills payable(b) bills payable(c) loans payable(c) loans payable(d) bonds payable(d) bonds payable

The promissory note- The promissory note-

the promissory notethe promissory noteissuerissuer

ASSETASSET(a) trade accounts(a) trade accountsreceivablereceivable

(b) bills receivable(b) bills receivable(c) loans receivable(c) loans receivable(d) bonds receivable(d) bonds receivable(e) deposits and(e) deposits and

advances.advances. The promissory note The promissory note-the promissory note-the promissory noteholderholder


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A financial guarantee is aA financial guarantee is a contractualcontractualrightright of the lender to receive cashof the lender to receive cashfrom the guarantor, and afrom the guarantor, and acorrespondingcorresponding contractual obligationcontractual obligation of the guarantor to pay the lenderof the guarantor to pay the lender


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Equity InstrumentsEquity Instruments

non-puttable equity shares,non-puttable equity shares,some types of preference sharessome types of preference shares

warrantswarrants


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Derivative Financial InstrumentsDerivative Financial Instruments

DerivativeDerivativefinancial financial instrumentsinstruments

financial options,financial options,futures andfutures andforwardsforwards

interest rate swapsinterest rate swaps

currency swapscurrency swaps

Primary Primary instrumentsinstruments receivablesreceivables

payablespayablesequity instrumentequity instrument


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Contracts to buy or sell non-financial Contracts to buy or sell non-financial items do not meet the definition of aitems do not meet the definition of afinancial instrument financial instrument because thebecause thecontractual right of one party tocontractual right of one party toreceive a non-financial asset or servicereceive a non-financial asset or serviceand the corresponding obligation of theand the corresponding obligation of theother party do not establish a present other party do not establish a present right or obligation of either party toright or obligation of either party to

receive, deliver or exchange a financial receive, deliver or exchange a financial asset asset


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PresentationPresentation

The issuer of a financial instrument The issuer of a financial instrument should classify the instrument should classify the instrument , or its , or itscomponent parts, on initial component parts, on initial

recognition as a financial liability, arecognition as a financial liability, afinancial asset or an equity financial asset or an equity instrument instrument in accordance with thein accordance with thesubstance of the contractual substance of the contractual

arrangement and the definitionsarrangement and the definitions

of of

a financial liability, a financial asset a financial liability, a financial asset and an equity instrument.and an equity instrument.


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Accounting Standard (AS) 32Accounting Standard (AS) 32Financial Instruments:Financial Instruments:

DisclosuresDisclosures


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OBJECTIVEOBJECTIVE

.. The objective of this Standard isThe objective of this Standard isto require entities to provide disclosures in theirto require entities to provide disclosures in theirfinancial statements that enable users tofinancial statements that enable users toevaluate:evaluate:

(a) the significance of financial instruments for the(a) the significance of financial instruments for theentitys financial position and performance; andentitys financial position and performance; and(b) the nature and extent of risks arising from(b) the nature and extent of risks arising fromfinancial instruments to which the entity isfinancial instruments to which the entity is

exposed during the period and at the reportingexposed during the period and at the reportingdate, and how the entity manages those risks.date, and how the entity manages those risks.

2.2. The principles in this Accounting Standard The p rinciples in this Accounting Standardcomplement the principles of AS 30 and AS 31comp lement the principles of AS 30 and AS 31


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DISCLOSURES IN BALANCEDISCLOSURES IN BALANCE

SHEETSHEET

Categories of financial assets andCategories of financial assets andfinancial liabilitiesfinancial liabilitiesFinancial assets or financial liabilitiesFinancial assets or financial liabilitiesat fair value through profit or lossat fair value through profit or lossReclassificationReclassificationDerecognitionDerecognitionCollateralCollateralAllowance account for credit lossesAllowance account for credit lossesCompound financial instruments withCompound financial instruments withmultiple embedded derivativesmultiple embedded derivativesDefaults and breachesDefaults and breaches


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OTHER DISCLOSURESOTHER DISCLOSURES

Accounting policiesAccounting policiesHedge accountingHedge accounting

Fair valueFair value


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RISKSRISKS

QUALITATIVEQUALITATIVEthe exposures to riskthe exposures to riskand how they arise;and how they arise;its objectives, policiesits objectives, policies

and processes forand processes formanaging the risk andmanaging the risk andthe methods used tothe methods used tomeasure the riskmeasure the risk

any changes in (a) orany changes in (a) or(b) from the previous(b) from the previousperiod.period.

QUANTITATIVEQUANTITATIVECredit risk Credit risk Liquidity risk Liquidity risk

Market risk Market risk


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Documents

Accounting Standard 31